The impact of XBRL on information asymmetry: evidence from loan contracting

Dazhi Chong · Hui Shi · Liuliu Fu · Hao Ji · Gongjun Yan

23 citations0/0 files storedJournal of Management Analytics

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Financial Reporting and XBRL Banking stability, regulation, efficiency Auditing, Earnings Management, Governance

Abstract

This paper examines whether and how the adoption of eXtensible Business Reporting Language (XBRL) reduces information asymmetry in loan contracting. We hypothesize that the adoption of XBRL can enhance information dissemination and mitigate the information asymmetry problem between borrowers and lenders. Using a sample of 554 US bank loan contracts, we find that borrowers who adopt XBRL enjoy more favourable price and non-price terms of bank loan contracts. Additional analyses indicate that the relations among XBRL adoption and bank loan price vary with loan structure. Overall, this research provides evidence that technology advancements such as XBRL reduce cost of bank loans by decreasing information asymmetry between borrowers and lenders.

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References

2001Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature 2000Structural Equation Modeling and Regression: Guidelines for Research Practice 1997Financial Intermediation, Loanable Funds, and The Real Sector 2004Information and the Cost of Capital 1995The Maturity Structure of Corporate Debt 2007Information Asymmetry and Financing Arrangements: Evidence from Syndicated Loans 2008Lending Relationships and Loan Contract Terms 2011Financial Reporting Quality and Investment Efficiency of Private Firms in Emerging Markets

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